Most investors, in the real estate industry, bank on tax deductions and breaks to be able to make some money. However, this wait can end up causing extreme cash flow issues. As such, finding an alternative is ideal and this is where the PAYG Income Tax Withholding Variation comes in.
PAYG Income Tax Withholding Variation (ITW) is a new withholding variation that was introduced in Australia on 1 July 2017. The primary purpose of PAYG ITW is to provide investors with more flexibility when it comes to their tax obligations. This option allows you to enjoy more income as you can ask you employer to adjust the amount withheld.
Challenges with Tax Deductions
If you have noticed, for you to get a tax deduction refund, you would need to wait for the financial year to come to an end, lodge your tax return and wait for the ATO to process it. While this is all necessary, it can be very difficult when you need the cash to invest in other things. This can often lead investors to make bad decisions as they are strapped for cash, leading them to make poor decisions with their money.
If you are in employment, your employer should withhold tax from your earnings and deposit with the ATO. This is meant to cover the estimated tax liability that is derived from the employment income.
Benefits of PAYG Income Tax Withholding Variation
With the PAYG withholding, you have the benefit of getting tax breaks, every time you are paid. Once you apply for this option, the ATO will inform your employer of the applicable tax rate and this effectively increases the money you take home.
Rather than waiting for the tax refund at the end of the financial year, you can apply for the PAYG ITW and have tax withheld at a lower rate, while you are still earning. This can help to manage your cash flow more effectively and ensure that you have the money available when needed.
It is important to note that you have to apply for this variation for every financial year. In the event of changing jobs, you have to lodge a fresh application as well. As an investor, these tax breaks will help you free up your cash and they can help streamline your investment operations.
The PAYG ITW is beneficial to people who are negatively geared as this will help to reduce the amount they need to pay tax on.
How to Lodge a PAYG ITW Variation
The application of PAYG income tax withholding variation is easy and straightforward. However, before making the application, it is advisable to talk to your accountant so that you are aware of the implications.
Once you have the details in hand, you can simply use your myGov account to lodge a PAYG ITW variation application with the ATO. It typically takes two weeks for the ATO to process and approve your application. You can also print the manual form and mail it to the ATO. However, this takes longer to assess and approve.
Use Accurate Figures
For the PAYG ITW variation, you need to have accurate estimates of your investment income and the deductions you are likely to make. Inaccurate figures will not get approved and can lead to the withholding tax variation application being rejected. You may also end up paying penalties.
Speak to Professional Accountants
PAYG ITW is a great way to manage cash flow while still taking advantage of tax deductions. While you can apply this yourself, it is best to use qualified accountants. At Accurate Business & Accounting Services we are always ready to help you get the most out of your tax deductions. Talk to us today!